Seven people have been arrested in Melbourne after allegedly preparing for an “ISIS-inspired” terrorist attack on Christmas Day.

The suspects were reportedly targeting Flinders Street Station, Federation Square, and St Paul’s Cathedral – all significant public spaces in the heart of Australia’s second-largest city.

Victorian state police confirmed the arrests, which followed raids targeting five addresses in suburbs in Melbourne’s north; Flemington, Meadow Heights, Dallas, Campbellfield and Gladstone Park.

Around 400 officers from the Victorian and Australian Federal Police were involved. Five men in their twenties are custody.

‘Multi-mode’ attack

Victorian Police chief Graham Ashton said: “Over the last fortnight… we have had to conduct a criminal investigation relating to the formation of what we believe was a terrorist plot.

“We believe that there was an intention to conduct what we call a multi-mode attack, possibly on Christmas Day.”

He said four of the five still in custody are Australian-born men of a Lebanese background who “self-radicalised”.

The other man is an Egyptian-born Australian citizen.

“The attack had the potential to cause significant community harm,” he said.

“The community should be concerned but should be reassured that we have got on top of this particular issue.”

Ashton said the plan possible included explosives, knives or firearms, after police recovered evidence of an improvised explosive device during the raids.

“We are anticipating that as a result of that questioning we will present a number of persons before the courts in the early afternoon, seeking to charge them with acts in preparation of a terrorist event.”

There will be an increased police presence over the holiday period.

State Premier Daniel Andrews said: “Victorians should go about their business.

“What the police will allege was not an act of faith, not an act of religious observance, it was, instead, in its planning, an act of evil, a criminal act,” he said.

Flinders Street Station. Photo: Scott Barbour/ Getty Images.

Speaking in Sydney, prime minister Malcolm Turnbull said Islamist terrorism is a global challenge that effects us all but urged Australian to “live as we always have”.

“What these criminals seek to do is to… seek to frighten Australians, they want to divide Australians, they want us to turn on each other. They will not succeed,” he said.

“While we have the finest police and security agencies in the world… but the threat level is probable.

“We cannot mitigate all risk. I can assure all Australians that our police services… right across the country are at the highest state of alert, learning from every incident… and putting in place measures to keep Australians safe.

Malcolm Turnbull. Photo by Stefan Postles / Getty Images / File

“Just as we should defy the terrorists by going about our lives in the normal way, we should also be alert ourselves.

“And if we see something that is of concern… we should call the national security hotline, 1800 123 400. Speak up. Don’t ever be afraid of making a call of letting the police know.

“Our police and intelligence services keep us safe because citizens keep them informed. It is up to all of us to keep our eyes open.”

‘The most serious in terms of its intent’

Australian federal justice minister Michael Keenan said the raids represented the 12th “disruption” of a terrorist plot targeting Australia, but added that it was “the most serious in terms of its intent”.

He recognised that Australia is currently living through the most difficult terrorism environment in history but the government has been clear sighted about what is required to do to keep Australians safe and today’s events are a result of that.

Federal police commissioner Andrew Colvin referred to the arrests as a “significant disruption” and “certainly concerns me more than any other event that I’ve seen.”

AFP commissioner Andrew Colvin. Photo: Getty / File

However, he said the raids had “removed this threat in its entirety”.

“We believe we have removed the bulk of this cell, of this particular group,” he said.

“This concerns me more than any other event that we’ve seen.”

Police will allege “quite progressed plans” and they were narrowing down what they were planning to do, the commissioner added.

Turnbull recalled speaking to a tourist on a Sydney ferry this morning on his commute to the city. The visitor expressed surprise that the prime minister was able to travel on public transport like everyone else.

“That is Australia. That’s what we’re standing up for. And we are not going to let these criminals disrupt our way of life,” Turnbull said.

Police say they will be providing further information on security arrangements over the next 24 hours.